Michael,
<<Why do they bother managing money when they could just manage their own fortunes? Because they generally make huge amounts as management fees.>>
True. They can also make smaller amounts consistently, which helps take the edge off short-term trading loss. They all have them. I have an information pricing theory that goes something like this. Let me stay to with the Wall Street Journal example. If we had next week's Wall Street Journal, we could obviously make a ton of money and we certainly wouldn't tell a soul about it. But let's say the copy of next week's Journal was 20% smudge so it was only 80% reliable. So what? We could still make a ton of money. Say the Journal was 50% smudged. Still okay. Maybe we would use a few stops in case we picked a smudge report of next week's prices, but we could still make money. Now say the paper was 60%, 70%, 80% or more smudged. Eventually we would reach a point where we could no longer make money acting on the information in the paper but only by selling the paper itself as a novelty--next week's WSJ. That's were newsletters, brokerage house retail reports (not necessarily buy-side reports) and people with "systems" make their money, not acting on the info but selling it. After all, JP Morgan has one of the best trading departments on the street and they don't talk to anyone about their trades until the trades are history.
Also, btw, the Dr. was dangling the promise of spectacular returns, a classic hustle. I liked your advice that he publicly benchmark his results on a real-time basis. There's a newsletter called Timer's Digest that has people call in a portfolio and any week by week changes. That way all the geniuses can't fudge.
Best,
-Steve |
